Docstoc

Product Liability Law Attorney

Document Sample
Product Liability Law Attorney Powered By Docstoc
					Chapter 7




Product
Liability Law
in Japan                                                                                      Wayne B. Mason




Sedgwick, Detert, Moran & Arnold LLP                                                                Akihiro Itoh




 Taking on the Company                                             strict liability, legislated, pure strict liability for all was not
                                                                   available until the advent of the PL Law.
Japan’s 1995 product liability statute has yet to spawn a             Between 1945 and 1990, only 150 product liability
U.S.-like flurry of plaintiffs’ litigation. But the legislation     cases were decided in Japan. Since the PL Law went into
has ushered in a new social consciousness of manufacturer          effect, the number of product liability lawsuits filed have
culpability – and ‘David vs. Goliath’ lawsuits are gaining         increased. Significantly, many of the new product liability
momentum. This article examines the changing nature of             lawsuits are being brought by individuals or small groups
Japanese product liability cases. The authors, Sedgwick            for relatively small claims. And even more importantly,
attorneys Wayne B. Mason and Akihiro Itoh, put the                 individual plaintiffs are now prevailing in their lawsuits
product liability statute into context by explaining the           and obtaining judgments against manufacturer defendants
historic, systemic and cultural disincentives to personal          for claims that a few short years ago would have been
injury and product liability lawsuits in Japan. They then          unactionable.
discuss the post-1995 landscape and demonstrate that the
statute has empowered a type of plaintiff that had long
                                                                    Consumer Plaintiffs Face Many Obstacles in Japan
been obscure in Japan, but has deep roots in the U.S.
legal system: the individual who takes on the company.             Injured parties have long faced systemic and cultural
                                                                   disincentives to personal injury and product liability
Introduction                                                       litigation in Japan. The new PL Law improved the playing
On July 1, 1994, Japan’s national legislature, the Diet,           field for plaintiffs in terms of expanding the cognizable
enacted the country’s first law specific to products liability:      legal theory of recovery, but it did not address the
the Product Liability Law (Law No. 85, 1994) (seizobutsu           significant barriers to recovery imposed by the Japanese
sekinin hou) (‘‘PL Law’’). The PL Law, which introduced            legal system. A review of Japan’s legal system illuminates
the concept of strict liability and expanded the definition         the challenges faced by individual consumer plaintiffs,
of a liable manufacturer, went into effect one year later,         and places the PL Law in context.
on July 1, 1995.
   Prior to the PL Law, no specific cause of action for             Systemic and Cultural Disincentives to Bringing Suit
strict product liability existed in Japanese jurisprudence.        The most significant hurdle faced by product liability and
Individual plaintiffs were forced to bring claims under            personal injury plaintiffs perhaps was, and still is, the
Japan’s Civil Code under a theory of contractual liability         nature of the Japanese legal system itself. Japan based its
or negligence. These theories afforded little relief for           modern legal system on French and German civil law
injured parties – and left individual plaintiffs at a particular   models. The system lacks the three main ingredients of a
disadvantage. A review of successful (from the plaintiff’s         robust plaintiffs’ practice: jury trials, punitive damages
perspective) product liability cases in Japan prior to 1995        and contingent fee agreements. Add to that the system’s
indicates that cases involving widespread injury to many           severe limitations on pretrial discovery, high attorneys’
plaintiffs (i.e., mass tort cases), rather than those involving    fees, costly court filing fees and protracted trials, and one
a single injury to one plaintiff, were more likely to be           can begin to appreciate the magnitude of the barriers to
redressed by the Japanese courts. Further, although some           litigation faced by injured Japanese consumers – and their
Japanese courts, in certain types of negligence cases, were        attorneys.
beginning to lower the burden of proof to almost resemble              The disincentives to litigation are reflected by the
                                                                   attorney pool. Only about 600 to 1000 new attorneys

                                                                                                                                         49
PRODUCT LIABILITY
     Sedgwick, Detert, Moran & Arnold LLP                                           Product Liability Law in Japan

     matriculate in Japan per year, sustaining an attorney              Perhaps the reality is that both factors are in play, but at
     population of approximately 19,000 in a country with an            minimum the hurdles presented by the Japanese legal
     overall population of approximately 120 million. Com-              system only further encourage non-litigious means of
     pared to the U.S., Japan is suffering a dearth of attorneys:       solving disputes.
     The U.S. has 18 times more attorneys per capita, which,
     stated another way, means that in Japan there is one               Before the PL Law, Limited Legal Theories Discouraged
     Japanese attorney per 6,315 persons, while there is one            Consumer Actions
     attorney per 356 persons in the U.S. Retaining a Japanese
                                                                        When injured parties filed product liability lawsuits before
     attorney is expensive: A prospective plaintiff must first
                                                                        1995, their claims had to sound in breach of contract
     pay a retainer based on the anticipated recovery amount,
                                                                        and/or negligence. Essentially, plaintiffs had to fit their
     and later pay a post-judgment fee based on the actual
                                                                        claims into any one of three statutes: Civil Code Articles
     award. For example, a plaintiff claiming $1 million in
                                                                        415, 570 or 709. Each poses its own challenge for
     damages would have to pay $36,000 in retainer fees.
                                                                        plaintiffs.
        Not only are the attorney fees high; the court filing fees
                                                                           Under Civil Code Articles 415 and 570, consumers
     are also much higher than those in the U.S., particularly
                                                                        have two theories of contract law (translated more
     when the damages claimed are high. For example, in a
                                                                        accurately as the ‘‘law of obligations’’) under which to
     case where a plaintiff claims ¥100,000,000 ($833,000 if
                                                                        pursue a product defect claim. Both theories require
     $1=¥120) in damages, the filing fee in Japan would be
                                                                        privity between the parties, however, which eliminates
     ¥417,600 ($3,480 at same rate), compared to the current            their use in most actions against manufacturers. Article
     $150 flat fee charged by federal district courts in the U.S.        415 provides for a contractual remedy if the obligor
     If the Japanese plaintiff loses his or her case, the filing fee     negligently fails in performing an obligation or duty.
     is not recoverable.                                                Buyers can recover damages for inadequate performance,
        Costly attorney fees are not unique to Japan. But,              as long as they established foreseeability of harm and
     unlike other legal systems, Japan has not embraced a               adequate causation. However, damages are generally
     contingency fee system, which in other jurisdictions               limited to replacement cost of the value of the subject of
     facilitates a plaintiff’s ability to file a lawsuit regardless of   the lawsuit. Sellers must overcome a presumption of
     cost. Since Japan does not have a jury system, judges              negligence, but a seller can rebut the presumption by
     usually decide damage amounts, and as can be expected,             proving the absence of defect at the time of sale or by
     judges are fairly conservative in the damages they award.          utilizing other defenses, such as disclaimers, statutes of
     Japan does not allow for punitive damages, and non-                limitations, and liquidated damages clauses. Further, a
     economic damages are also limited. Therefore, plaintiffs           seller will not be liable under Article 415 if the defect was
     cannot hope for a ‘‘windfall’’ in damages, such as enjoyed         due to a situation beyond his control or if he took
     by many U.S. plaintiffs.                                           reasonable steps to inspect the product and prevent the
        Plaintiffs also face significant limits on pretrial discovery    defect. Article 570 specifically concerns defective products,
     compared to that available in the U.S. In Japan, the court         providing a breach of warranty action for defects not
     has authority and control over the gathering of evidence,          foreseen or contemplated by the buyer at the time of sale.
     and as such, most evidence is not produced until trial.            Two aspects of Article 570 limit its usefulness. First, the
     Attorneys have no real power to compel the production              purchaser must have had no knowledge of the defect at
     of evidence or to elicit testimony from adverse parties or         the time of purchase; otherwise, the buyer is considered
     third parties, and they thus rely on voluntary cooperation         to have assumed the risk. Second, damages are limited to
     or intervention by the court. The Japanese Code of Civil           the price of the product.
     Procedure was amended in 1998 to expand litigants’                    Before the PL Law, most plaintiffs brought product
     discovery rights, but still does not provide for a level of        liability suits under Civil Code 709, which sets forth the
     pretrial discovery comparable to that available in the U.S.        general principles of negligence. The injured plaintiff had
        The nation is served by a mere 3,000 judges, and trials         to prove five elements at a level of proof similar to
     do not progress continuously from day to day; rather,              ‘‘beyond a reasonable doubt’’: the product had to be
     there can be periods of months between hearings. Whether           defective, the defect must have resulted from the act of
     the erratic trial schedule is a result of the judges’              the defendant, the plaintiff suffered an injury, said injury
     overflowing dockets or a deliberate attempt to promote              was caused by the product, and the defendant must have
     settlement, the uncertainty adds another layer of risk for         breached the duty of care owed to the plaintiff. Thus, to
     prospective plaintiffs and their lawyers.                          prevail a plaintiff had to demonstrate, by proving the
        Plaintiffs do have an alternative to formal litigation,         defendant’s intent or negligence beyond a reasonable
     however. Japan has long had an extensive alternative               doubt, that the defendant manufacturer breached its duty
     dispute resolution system in place, and – whether or not           to avoid foreseeable consequences. This requirement,
     it developed as a consequence of the risk-laden court              combined with a limited discovery system and other
     system – Japan’s ADR system deters litigants from using            obstacles, made success for the plaintiff very difficult, if
     the courts by providing a faster, less-expensive alternative.      not impossible.
     There is debate on whether cultural traits of the Japanese
     contribute to their non-litigious nature and lead parties to        PL Law a Product of Political, Social and
     favor ADR. Many scholars attribute the Japanese desire              Economic Change
     to avoid confrontation and the seeking of group harmony
     as contributing to the lack of litigation in Japan. Others,        The PL Law arose in part to address the recognized
     however, believe that the Japanese sue at the same rate as         limitations imposed on consumer plaintiffs by then-
     citizens of Great Britain and Germany, but are severely            available legal theories, but also in response to economic
     hampered by the nature of the Japanese legal system.               and international pressures. The first movement toward

50
                                                                                                            PRODUCT LIABILITY
Sedgwick, Detert, Moran & Arnold LLP                                       Product Liability Law in Japan

a distinctive products liability law arose in 1975, when        DECONSTRUCTING THE PL LAW
the Product Liability Research Group published a Draft
Model Law. This Draft focused on the concept of strict         The PL Law consists of six Articles and two supplementary
liability and suggested procedural improvements in areas       provisions. (The complete text of the PL Law can be
such as discovery. However, such a resolution was              found in the Appendix to this article.) As in any legal
impossible to legislate because the proposals were anath-      system, the text of the statute is significant; however, given
ema to the interests of the pro-business Liberal Democratic    that Japan uses a civil code system that does not rely on
Party, which continuously held power in Japan from 1955        case law to establish legal precedents, the language of the
until 1993. It was only after voters finally elected a new      PL Law takes on additional import and deserves close
coalition government in 1993 that the enactment of the         attention.
PL Law became possible. The new government, backed
by a strong consumer-oriented constituency, had the            Article 1: Purpose
support to introduce and promulgate the new PL Law.
                                                                    The purpose of this Law is to protect the injured
   Concurrent with the political changes in the early
                                                                    individual by setting forth the liability of the
1990s, Japan was experiencing deregulation of its econ-
                                                                    manufacturer, etc., for damages when a defect in a
omy, which led to a growing recognition that more
                                                                    product causes injury to a person’s life, body, or
privatized approaches to consumer protection, such as
                                                                    property, and thereby contribute to the stabilization
the PL Law, were necessary to protect consumers. This is
                                                                    and improvement of peoples’ lives and to the sound
in contrast to the Japanese government’s traditional role
                                                                    development of the national economy.
of strictly regulating consumer products, which some
scholars say provided the necessary incentive for manu-        Critics have voiced concerns about this preamble because,
facturers to produce safe products, as opposed to the U.S.     even though it does not provide binding statements of
system where the desire to avoid litigation supposedly         law, it may be construed to be a statement of legislative
provides U.S. manufacturers with the same incentive.           intent, which courts may look to in close cases to ascertain
   Japan also felt pressure from the international com-        the proper meaning of statutes. When the language of
munity to ease entry into its domestic market. With the        Article 1 was made public, there was concern amongst
Japanese government strictly regulating consumer prod-         consumer groups that the wording of the last sentence of
ucts and thus creating non-tariff barriers to non-Japanese     the article (‘‘contribute to…the sound development of the
manufacturers, some worried that Japanese manufactur-          national economy’’) would lead to a judicial interpretation
ers would be accused of competing unfairly in their            of law that favored the manufacturers — who were
domestic market without a product liability law. In            supposed to be the targets of liability. However, the official
addition, with the European Community’s Council                position of Japan’s Economic Planning Agency is that
Directive on defective products of 1985 and the promul-        pressing for the rights and protection of the injured is
gation of new product liability laws throughout Asia,          actually the best way to encourage the healthy develop-
Japan was, in 1994, the only industrialized country            ment of the economy. Examination of other Japanese
without a products liability statute. These international      laws that appear similarly self-contradictory, as well as
factors certainly contributed to the passage of the PL Law.    cases adjudicated under the new PL Law, indicates that
   Even though the PL Law did not go into effect until         the consumer groups may be wrong and that the new PL
1995, there have been mass tort product liability cases in     Law is beneficial for consumers — albeit possibly more as
which the Japanese courts appeared to acknowledge and          a collective, rather than individual, benefit.
compensate for some of the procedural burdens borne by
plaintiffs. For example, the Morinaga Dairy case involved      Article 2: Definitions
twelve thousand infants who were sickened by arsenic-               (1) As used in this Law, the term ‘‘product’’ means
tainted milk in 1955, and in Japan, thalidomide drug                movable property manufactured or processed.
cases involved 63 families who sued the government and              (2) As used in this Law, the term ‘‘defect’’ means lack
drug manufacturers in several lawsuits filed in 1963 to              of safety that the product ordinarily should provide,
1965 for failure to warn of the drug’s side effects. In each        taking into account the nature of the product, the
case, the Japanese courts lowered the plaintiffs’ burden of         ordinarily foreseeable manner of use of the product,
proof by inferring negligence and admitting statistical             the time when the manufacturer, etc., delivered the
evidence. Then, as these cases captured the public’s                product, and other circumstances concerning the
attention, the Japanese government assisted in collecting           product.
necessary evidence. More telling is a 1994 case involving           (3) As used in this Law, the term ‘‘manufacturer,
a television set that caught fire, which commentators                etc.’’ means any one of the following:
observed as ‘‘decided in anticipation of the coming PL              Any person who manufactured, processed, or im-
law.’’ Even though the individual plaintiff was unable to           ported the product as business (hereinafter called
clearly prove causation, the Osaka district court assumed           ‘‘manufacturer’’);
manufacturer negligence because the television set was              Any person who, by putting his name, trade name,
proven to be defective. Some scholars thus argue that               trade mark or other feature (hereinafter called
these cases show that the Japanese courts were already              ‘‘representation of name, etc.’’) on the product
moving towards the use of a strict liability scheme, or at          presents himself as its manufacturer, or any person
least a lessening of the burden of proof by plaintiffs, and         who puts the representation of name, etc., on the
that the new PL Law is evolutionary, not revolutionary.             product in a manner mistakable for the manufac-
                                                                    turer;
                                                                    Apart from any person mentioned in the preceding
                                                                    subsections, any person who, by putting the repre-

                                                                                                                               51
PRODUCT LIABILITY
     Sedgwick, Detert, Moran & Arnold LLP                                        Product Liability Law in Japan

           sentation of name, etc., on the product, may be           sentence of this Article exempts claims for damages when
           recognized as its manufacturer-in-fact, in light of       the product itself is the only item damaged.
           circumstances concerning manufacturing, process-             Wage loss due to a product’s defect can be claimed as
           ing, importation or sales, and other factors.             long as causation is shown. The law does not limit
     Key to this section is the definition of ‘‘product.’’ The PL     recovery or provide for a maximum limit for a producer’s
     Law does not apply to real property or to energy, services      total liability, even with multiple claimants. However, the
     and presumably other incorporeal items, like software.          PL Law does not cover pure economic loss, which must
     However, at least one scholar believes that software            be recovered under the Civil Code. Should the economic
     integrated into computer-driven products might be               loss occur along with other damages due to a defective
     interpreted as subject to the law, if the software is found     product, the economic loss can be recovered together
     to be part of the physical product. Further, real property      with the other damages under the PL Law.
     and fixtures which become part of real property are
     outside the scope of the law, even though real property         Article 4: Exemptions
     traditionally is one of the largest sources of product                In cases where Article 3 applies, the manufacturer,
     liability claims in Japan. The law covers all types of                etc., shall not be liable as a result of Article 3 if he
     vaccines and blood products, and although waste products              proves:
     are not covered by the law, secondhand goods are subject              (1) That the state of scientific or technical knowledge
     to the PL Law.                                                        at the time when the manufacturer, etc., delivered
        It has been argued that the definition of ‘‘defect’’                the product was not such as to enable the existence
     provides consumers with nothing new legally, and instead              of the defect in the product to be discovered; or
     represents a step back from true strict liability theory.             (2) In the case where the product is used as a
     Because the definition incorporates such language as ‘‘the             component or raw material of another product, that
     normally anticipated method of use,’’ some scholars                   the defect is solely attributable to compliance with
     believe the PL Law admits considerations of comparative               the instruction concerning the specifications given
     negligence and forseeability, which could possibly allow a            by the manufacturer of the other product, and that
     court to apportion fault to a plaintiff who uses the product          the manufacturer, etc., committed no error giving
     in an unforeseeable manner or who incorrectly installs or             rise to the defect.
     misuses a product. This approach has been, in fact, used
                                                                     The first exemption is the ‘‘state of the art,’’ or, literally
     by the courts in recent cases under the new law. Further,
                                                                     translated, the ‘‘development risk’’ exemption. This
     the courts are granted more flexibility because of the
                                                                     defense exempts a manufacturer for damage caused by a
     catch-all phrase, ‘‘all other circumstances relating to the
                                                                     defect where 1) given the extent of scientific and technical
     product,’’ which allows courts to consider other factors
                                                                     knowledge, 2) at the time the product left the manufac-
     unique to a particular product.
                                                                     turer’s control, 3) it was impossible to discover the
        The biggest change may be that the PL Law defines a
                                                                     existence of a defect.
     ‘‘manufacturer’’ very broadly, to allow anyone who puts
                                                                        In addition, the special provision in Article 4, section 2
     his trademark, trade name, or other identifier on the
                                                                     offers an exemption from liability to small- and medium-
     product to be sued as a liable party, even if the product
                                                                     size component manufacturers if the defect is the result of
     was produced by someone else. Thus, not just manufac-
                                                                     following the design of another manufacturer, provided
     turers, but component manufacturers, processors, import-
                                                                     that the component manufacturer has not otherwise been
     ers, and ‘‘private labelers’’ are subject to liability.
                                                                     negligent with respect to the alleged defect. Clearly, this
                                                                     was a policy decision designed to address the concerns of
     Article 3: Products Liability                                   Japan’s smaller manufacturers, with fewer resources, non-
                                                                     existent legal departments, and weak organization. Since
            The manufacturer, etc., shall be liable for damages
                                                                     these smaller manufacturers support the larger manufac-
            resulting from injury to another’s life, body or
                                                                     turers, their place in the national economy is one of high
            property due to a defect in the delivered product
                                                                     importance.
            which he manufactured, processed, imported or put
            the representation of name, etc., as described in
            subsection 2 or 3 of section 3 of Article 2. However,    Article 5: Limitations Period
            the manufacturer, etc., is not liable when only the           (1) The right for damages provided in Article 3 shall
            defective product itself is damaged.                          be extinguished by prescription if the injured person
     The language of this Article appears to create strict                or his legal representative does not exercise such
     liability for manufacturers by allowing injured plaintiffs           right within 3 years from the time when he becomes
     to sue without having to show negligent conduct by the               aware of the damage and the liable party for the
     manufacturer. However, in the absence of an express                  damage. The same shall also apply upon the
     showing of burden of proof, some scholars debated                    expiration of a period of 10 years from the time
     whether the language in this Article truly provided for a            when the manufacturer, etc., delivered the product.
     strict liability regime. Yet recent cases of plaintiffs with         (2) The time period in the latter sentence of section
     little or no evidence other than testimony prevailing over           1 of this Article shall be calculated from the time
     manufacturers clearly show that the law places a burden              when the damage arises, where such damage is
     on manufacturers to disprove liability.                              caused by the substances which are harmful to
         The term ‘‘delivery’’ requires an intentional transfer of        human health when they remain or accumulate in
     possession, thus shielding the manufacturer from liability           the body, or where the symptoms for such damage
     if the product in question was stolen or otherwise                   appear after a certain latent period.
     misappropriated. Also, it is important to note that the last    Plaintiffs have three years to bring a lawsuit from the time

52
                                                                                                         PRODUCT LIABILITY
Sedgwick, Detert, Moran & Arnold LLP                                         Product Liability Law in Japan

of discovery of injury and the identity of the person with       with consumer information centers. Surveys of companies
the duty to compensate, as long as this is within 10 years       and organizations in major industries are reporting
from when the manufacturer placed the product on the             increases in consumer inquiries and claims for defective
market. In cases where there is repeated use or a build-         products. The Japanese government has taken an active
up effect, or cases where there is a latent period involving     role in responding to this increased demand for informa-
no symptoms, the time is calculated from appearance of           tion, thereby empowering its population. For example,
symptoms of injury. These time limits are in contrast to         the National Consumer Affairs Center of Japan estab-
the 20 years available under Civil Code Article 724 for          lished a Web site in 1996 that contains general consumer
other legal actions, such as tortious acts.                      information, including information specific to the PL
                                                                 Law. This government Web site, found at
                                                                 www.kokusen.go.jp, features a list of links, updated daily,
Article 6: Application of the Civil Code
                                                                 containing product recall information and announce-
      Insofar as this law does not provide otherwise, the        ments regarding products with potential problems. Each
      liability of the manufacturer, etc., for damages           link provides a description of the product and its problem,
      caused by a defect in the product shall be subject to      and gives the public the manufacturer’s contact informa-
      the provisions of the Civil Code (Law No. 89, 1896).       tion.
Several issues not covered by the PL Law are left to be
interpreted under the Civil Code provisions. These               Industry Response to the PL Law
include the principle and application of comparative             The corporate response to the PL Law has been highly
negligence, the problem of joint liability among multiple        proactive, thereby contributing to consumer awareness.
parties involved in defective goods cases, rights of recourse,   In product development, there is a new emphasis on
and employee liability. Further, the new PL Law does not         warnings and instructions. For example, before the PL
address exemption or limitation clauses, nor does it clarify     Law, warning labels in Japan tended to be vague and
issues of causation. Finally, the PL Law does not address        only slightly cautionary, for fear that strong language
barring the bringing of product liability claims under           would insult Japanese consumers. In contrast, instruction
alternative theories of tort or contract.                        manuals are now including warnings against common-
   Thus, it appears that the Civil Code allows a defendant       sense risks, such as a Japanese laptop computer manual
to limit liability by way of comparative damages. But            that warns its customers against the risk of injuring their
Article 6 allows a plaintiff to seek compensation for            fingers when closing the laptop. Ironically, this newfound
damages under both the PL Law and the Civil Code, to             enthusiasm for warning labels spawned a proliferation of
the extent that they are not overlapping. For example, a         inconsistent labels for the same warnings, which in turn
plaintiff may bring Article 709 tort claims if the PL Law’s      confused consumers. There have been efforts to standard-
10 year statute of limitations has passed, because 709           ize labels.
claims fall under the 20-year rule.                                 Manufacturers who previously had the luxury of
   Some scholars believe that this provision reinforces the      ignoring consumer complaints, knowing the substantial
status quo of the anti-individual plaintiff Japanese legal       hurdles injured consumers faced, cannot now afford the
system with regard to the concept of strict liability.           risk of a consumer taking the manufacturer to court.
Plaintiffs still face a high burden of proof, punitive           Knowing that a consumer need prove only the existence
damages are not allowed, and courts have discretion to           of a product defect in court, manufacturers are now
apply comparative negligence. Other systemic obstacles           quickly acknowledging their defective products and
include expensive attorneys’ and court fees, the scarcity        settling claims with consumers. Product recalls have
of attorneys, and the intermittent nature of Japanese            increased in number and publicity, and certain products
trials. While these criticisms may be valid, recent cases        have been redesigned or discontinued. Drug companies
suggest that these barriers may not be as formidable as          are now making more voluntary disclosures of possible
once thought.                                                    adverse side effects in their package inserts, and many
                                                                 drug and medical equipment manufacturers have recalled
                                                                 their defective products without concealment. Japanese
 Empowering the Individual Plaintiff
                                                                 toymakers are coating the small parts of their toys with
                                                                 foul-tasting chemicals to discourage children from putting
Effect of the PL Law on the Japanese Consumer                    those parts in their mouths, and new appliances are being
The PL Law did not go on the books quietly. There is a           built with safety devices such as sensors that turn off
high level of public awareness about the law and its             heaters when there is vibration or the heater topples.
potential uses. Japanese consumers were introduced to               Some manufacturers have even withdrawn from their
the new law through books, videos, and the Japanese              markets. Japan’s two major manufacturers of silicon
media’s coverage of debate between business representa-          decided to withdraw from the market due to litigation
tives and consumer advocates over the scope of the law.          concerns. Most recently, in response to only four instances
A survey done after the enactment shows that 70 percent          of a certain model washing machine catching fire, a well-
of Tokyo residents were aware of the new law, and books          known, leading manufacturer announced in 2002 that it
on the new PL Law became best sellers — an unprece-              would inspect and repair 205,000 units of the same model
dented event for legal books. On a nationwide scale, the         without charge.
number of households that had not heard of the new PL               Individual corporations and industry groups are also
Law dropped from 32 percent in 1995 to 16 percent in             attempting to avoid the PL Law by creating their own
1996.                                                            dispute resolution facilities. These ADR centers are
   With this newfound knowledge, Japanese consumers              geared towards resolving consumer complaints without
are increasingly inquiring about their rights and consulting     the need for litigation. When claims are brought, these

                                                                                                                               53
PRODUCT LIABILITY
     Sedgwick, Detert, Moran & Arnold LLP                                           Product Liability Law in Japan

     centers are supposed to conduct their own investigation,           poisoning after eating the fish. The court held that, ‘‘the
     and should the product be defective, negotiate on behalf           act of handling the food product and then serving it to
     of the consumer with the manufacturer. If the consumer             customers constitutes ‘processing,’ and the food can be
     is not satisfied with the results of the negotiation, the           called defective because it contained toxins.’’ The only
     consumer can choose to have the center’s arbitration               way that the defendant restaurant could be exempt from
     panel decide the case. If this result is still unsatisfactory to   responsibility is to show that, using the ‘‘highest levels of
     the consumer, then the ADR center is supposed to help              knowledge or technology available in the world, such
     the consumer pursue litigation. Of course, the criticism is        toxins would not have been detected,’’ thus demonstrating
     that these manufacturer-funded ADR centers do not                  the court’s application of strict liability upon this ‘‘manu-
     adequately represent consumer interests, and that this is          facturer.’’ This case was not the first involving tainted
     one way to keep product defect information from the                food; indeed a few months earlier the same court heard a
     general public.                                                    case involving botulism poisoning from imported canned
        There has also been a sharp increase in the purchase            olives served at an Italian restaurant.
     of product liability insurance by major corporations.                 Such application of strict liability, however, does not
     While private product liability insurance has existed in           mean that all claims for product defect will result in a
     Japan for over 40 years, the major marine and fire                  verdict against the manufacturer. When a man claimed
     insurance companies reported substantial increases in              that he found a hole in his Japanese-produced condom
     product liability insurance sales in 1994 and 1995.                after having sex with a prostitute in Thailand, and that
     Further, three major associations of small and midsize             he suffered the damage of fearing he had contracted
     companies created a special insurance pool to enable               AIDS, the Tokyo court summarily dismissed the suit,
     small and midsize producers to purchase the insurance at           stating that the plaintiff should not have engaged in sex
     discount, with premiums cut by 47 percent.                         with a prostitute in the first place. This case is remarkable
                                                                        not for its outcome, but by virtue of having made its way
     Individual Plaintiffs Test the Law — and Many Win                  to court at all. Japanese plaintiffs are beginning to push
     By looking at the lawsuits filed as of July 2002 under the          the envelope in order to test the reach of the PL Law.
     PL Law, as reported by the National Consumer Affairs
     Center Web site, one can see the wide range of products             Looking Ahead
     that the PL Law covers, as well as Japanese consumers’
     newfound interest in utilizing this law. These cases have          By empowering the individual plaintiff, the enactment of
     involved ‘‘products’’ such as school lunches, software on          the PL Law signified an important change in Japanese
     a computer, ‘‘konnyaku’’ jelly, electric wheelchairs,              law. Predictions by scholars that the law would accomplish
     automobiles and trucks, instant noodles, lowfat milk,              only minimal change appear to be wrong. While the PL
     artificial breathing devices, surgical devices, electric hot        Law has not caused an explosion in the number of lawsuits
     pots, imported canned olives served at a restaurant, and           to rival U.S. levels, there has been an increase in the
     even cigarettes. Other examples include tea containers             number of product liability claims and lawsuits filed by
     and condoms. Surveys show that while there are still               individuals. More importantly, these lawsuits are resulting
     relatively few cases being litigated, the number of product        in awards to plaintiffs for claims that previously would
     defect claims against manufacturers, and the number and            not only have been unactionable, but also most likely
     amount of product liability insurance payouts, has risen           would not even have been brought.
     dramatically since the passage of the PL Law.                          Japanese manufacturers, while not yet in the same
        The first case decided under the PL Law involved a               frame of mind as their American counterparts, have
     young woman who, after drinking orange juice she had               aggressively attempted to meet the challenge with better
     purchased at the local McDonald’s fast food restaurant,            products and warnings, more consumer awareness and
     allegedly began to vomit blood. The doctor who examined            education, recalls, and an increase in the purchase of
     her found bleeding under the mucus membrane in her                 insurance. Japanese manufacturers and insurers also
     esophagus. As a result, the woman sued McDonald’s, on              appear to be more quickly settling claims with individual
     the grounds that a foreign object in the orange juice              consumers, rather than risk the publicity and uncertainty
                                                                        of litigation.
     caused the drink to be defective. On July 1, 1999, the
     Nagoya district court agreed, finding that, despite the                 The Japanese legal system still maintains barriers to
     plaintiff’s exaggeration of injury, the orange juice was           litigation for the average product liability plaintiff –
     defective even though the court was unable to ascertain            barriers that have been highlighted now that the PL Law
     exactly what foreign object lead to her injury. The court          is being tested by individual plaintiffs. But these systemic
     reasoned that it was possible for extraneous matter to be          hurdles are beginning to be addressed as well. The New
     mixed into the orange juice as the juice was being                 Civil Procedure Code of 1998 facilitated expanded pretrial
     prepared. Thus, the juice was deemed ‘‘defective’’ under           discovery. There are new proposals for calling for an
                                                                        increase in the number of attorneys admitted annually to
     the PL Law. Although plaintiff asked for ¥400,000
     (approximately $3,300 if U.S. $1=¥120) in damages, the             practice in Japan, as well as calls for more deregulation of
     judge imposed only ¥100,000 (about $830) in damages                the Japanese economy. Though these changes may be
     on McDonald’s. The defendant was ordered to pay a                  subtle when taken individually, their cumulative effect
     quarter of the litigation costs, and the plaintiff the             may well propel Japan towards a plaintiff-driven legal
     remainder.                                                         system.
        More recently, in December 2002, the Tokyo district
     court found that improperly prepared sashimi (fish served
     raw) could be considered a product under the PL Law,
     and found for eight plaintiffs who complained of food

54
                                                                                                            PRODUCT LIABILITY
Sedgwick, Detert, Moran & Arnold LLP                                                 Product Liability Law in Japan

 AUTHORITIES AND ACKNOWLEDGEMENT                                               Apart from any person mentioned in the preceding
                                                                               subsections, any person who, by putting the repre-
Secondary sources relied upon by the authors in preparing this article         sentation of name, etc., on the product, may be
are as follows: Phil Rothenberg, Note: Japan’s New Product                     recognized as its manufacturer-in-fact, in light of
Liability Law: Achieving Modest Success, 31 LAW & POL’Y                        circumstances concerning manufacturing, process-
INT’L BUS. 453 (2000); Andrew Marcuse, Comment: Why                            ing, importation or sales, and other factors.
Japan’s New Products Liability Law Isn’t, 5 PAC. RIM L. &                Article 3: Product Liability
POL’Y 365, (1996); Hiroshi Sarumida, Comparative Institutional
Analysis of Product Safety Systems in the United States and Japan:       The manufacturer, etc., shall be liable for damages
Alternative Approaches to Create Incentives for Product Safety, 29       resulting from injury to another’s life, body or property
CORNELL INT’L L.J. 79 (1996); Glenn Theodore Melchinger,                 due to a defect in the delivered product which he
Recent Developments: For the Collective Benefit: Why Japan’s New          manufactured, processed, imported or put the represen-
Strict Product Liability Law is ‘‘Strictly Business,’’ 19 HAWAII         tation of name, etc., as described in subsection 2 or 3 of
L. REV. 879 (1997); Jason F. Cohen, Note, The Japanese                   section 3 of Article 2. However, the manufacturer, etc., is
Product Liability Law: Sending a Pro-Consumer Tsunami Through            not liable when only the defective product itself is
Japan’s Corporate and Judicial Worlds, 21 FORDHAM INT’L                  damaged.
L.J. 108 (1997); R. Daniel Kelemen & Eric C. Sibbitt, Article:           Article 4: Exemptions
The Americanization of Japanese Law, 23 U.PA.J.INT’L ECON.               In cases where Article 3 applies, the manufacturer, etc.,
L. 269 (2002); Hireyuki Kobayashi and Yoshimasa Furuta,                  shall not be liable as a result of Article 3 if he proves:
Article: Products Liability Act and Transnational Litigation in          1. That the state of scientific or technical knowledge at
Japan, 34 TEX. INT’L L.J. 93 (1999).                                         the time when the manufacturer, etc., delivered the
   The authors also wish to thank Mr. Hiroyuki Kita, Manager,                product was not such as to enable the existence of the
Legal Department of Bridgestone Corporation, for his valuable                defect in the product to be discovered; or
insights in the writing of this article.                                 2. In the case where the product is used as a component
                                                                             or raw material of another product, that the defect is
 APPENDIX                                                                    solely attributable to compliance with the instruction
                                                                             concerning the specifications given by the manufac-
This translation is provided by co-author Akihiro Itoh, who consulted        turer of the other product, and that the manufacturer,
the following English translations in addition to the official Japanese       etc. committed no error giving rise to the defect.
version: Product Liability Law, Law No. 85, 1994, Translated by          Article 5: Time Limitations
Luke Nottage, c 1997; Glenn Theodore Melchinger, RECENT                  1. The right for damages provided in Article 3 shall be
DEVELOPMENTS: For the Collective Benefit: Why Japan’s                         extinguished by prescription if the injured person or
New Strict Product Liability Law is ‘‘Strictly Business,’’ 19                his legal representative does not exercise such right
Hawaii L. Rev. 879 (1997).                                                   within 3 years from the time when he becomes aware
                                                                             of the damage and the liable party for the damage.
The Product Liability Law (Law No. 85, 1994)                                 The same shall also apply upon the expiration of a
Article 1: Purpose                                                           period of 10 years from the time when the manufac-
The purpose of this Law is to protect the injured individual                 turer, etc. delivered the product.
by setting forth the liability of the manufacturer, etc., for            2. The time period in the latter sentence of section 1 of
damages when a defect in a product causes injury to a                        this Article shall be calculated from the time when the
person’s life, body, or property, and thereby contribute to                  damage arises, where such damage is caused by the
the stabilization and improvement of peoples’ lives and to                   substances which are harmful to human health when
the sound development of the national economy.                               they remain or accumulate in the body, or where the
                                                                             symptoms for such damage appear after a certain
Article 2: Definitions                                                        latent period.
1. As used in this Law, the term ‘‘product’’ means
   movable property manufactured or processed.                           Article 6: Application of Civil Code
2. As used in this Law, the term ‘‘defect’’ means lack of                Insofar as this law does not provide otherwise, the liability
   safety that the product ordinarily should provide,                    of the manufacturer, etc., for damages caused by a defect
   taking into account the nature of the product, the                    in the product shall be subject to the provisions of the
   ordinarily foreseeable manner of use of the product,                  Civil Code (Law No. 89, 1896).
   the time when the manufacturer, etc., delivered the                   Supplementary Provisions
   product, and other circumstances concerning the                       1. This Law shall come into force the day after one year
   product.                                                                  from the date of promulgation [July 1, 1994], and shall
3. As used in this Law, the term ‘‘manufacturer, etc.’’                      apply to the products delivered by the manufacturer,
   means any one of the following:                                           etc. after this Law comes into force.
      Any person who manufactured, processed, or im-                     2. Partial Amendment of the Law on Compensation for
      ported the product as business (hereinafter called                     Nuclear Damage: The Law on Compensation for
      ‘‘manufacturer’’);                                                     Nuclear Damage (Law No.147, 1961) shall be partially
      Any person who, by putting his name, trade name,                       amended as follows:
      trade mark or other feature (hereinafter called                    In section 3 of Article 4 of that Law, ‘‘and the Law
      ‘‘representation of name, etc.,’’) on the product                  relating to the Limitation of the Liability of ship-owners
      presents himself as its manufacturer, or any person                (Law No. 94, 1975)’’ shall be amended as, ‘‘the Law
      who puts the representation of name, etc., on the                  relating to the Limitation of the Liability of ship-owners
      product in a manner mistakable for the manufac-                    (Law No. 94, 1975) and the Product Liability Law (Law
      turer;                                                             No. 85, 1994)’’.

                                                                                                                                         55
PRODUCT LIABILITY
     Sedgwick, Detert, Moran & Arnold LLP                                                 Product Liability Law in Japan

                              Wayne B. Mason                                                          Akihiro Itoh
                              1717 Main Street                                                        One Embarcadero Center
                              Suite 5400                                                              16th Floor
                              Dallas, TX 75201-7367                                                   San Francisco, CA 94111-3628
                              Tel:     +1 469 227 8200                                                Tel:     +1 415 781 7900
                              Fax:     +1 469 227 8004                                                Fax:     +1 415 781 2635
                              Email:   wayne.mason@sdma.com                                           Email:   akihiro.itoh@sdma.com
                              WWW:     www.sdma.com                                                   WWW:     www.sdma.com

     Wayne B. Mason is a partner with Sedgwick, Detert, Moran &               Akihiro Itoh is an associate at Sedgwick, Detert, Moran & Arnold’s
     Arnold, resident in the firm’s Dallas office, and chairs the firm’s         San Francisco office and is a member of the firm’s Mass Torts/
     Asian Practice Group. An experienced trial attorney, Mr. Mason           Product Liability Group. Mr. Itoh is fluent in Japanese and is
     routinely handles litigation in many states on behalf of national        familiar with Japanese culture and business. In addition to
     and international clients. He also acts as national and regional         handling complex litigation matters on behalf of international
     counsel for clients coordinating their litigation and is an advisor to   clients, Mr. Itoh has provided on-site counsel in Japan to one of
     several corporations based in Japan regarding potential exposure         the firm’s Japan-based clients and one of the largest corporations
     in U.S. product liability litigation and other legal matters.            in Japan. Mr. Itoh counseled the firm’s client on various American
        Mr. Mason has significant experience in class action litigation        legal issues, while simultaneously gaining valuable insight into the
     and other complex litigation cases. His scope of practice also           workings of a large Japanese corporation.
     includes complex insurance, products liability, pharmaceutical,             Mr. Itoh obtained his undergraduate degree from the University
     commercial, and transportation litigation. Mr. Mason counsels            of California at Berkeley. He studied at Keio University in Japan
     corporations about managing litigation and minimizing exposures.         before attending Boston University School of Law where he earned
     He is a frequent speaker on CLE subjects to broad audiences, from        his J.D. Before joining Sedgwick, Mr. Itoh began his legal career
     in-house programs to national seminars.                                  as an attorney and officer in the United States Navy’s Judge
        Mr. Mason graduated cum laude from the University of                  Advocate General’s Corps, where he successfully defended military
     Tennessee at Chattanooga and earned his J.D. from Samford                members in courts-martial and administrative hearings.
     University, Cumberland School of Law.




            Sedgwick, Detert, Moran & Arnold LLP is one of the top international litigation and trial law firms,
            with more than 350 attorneys dedicated exclusively to mitigating potential damages through vigorous
            defense strategies and long-term litigation avoidance counseling. As the firm now enters its eighth
            decade of practice, its collective experience spans the globe and virtually every industry.
            Sedgwick attorneys have tried cases in jurisdictions throughout the U.S. and in international
            tribunals, working from the firm’s offices in San Francisco, London, New York, Zurich, Los Angeles,
            Orange County (California), Chicago, Newark (New Jersey), Dallas, and Paris. The firm boasts a
            talented pool of diverse, multilingual lawyers, among whom over 13 different languages are spoken.
            Sedgwick’s attorneys have tried to verdict more jury and bench trials than litigators in the 10 largest
            U.S. law firms.




56
                                                                                                                      PRODUCT LIABILITY

				
DOCUMENT INFO
Description: Product Liability Law Attorney document sample